Who’s to blame for Euro crisis?

The Paris-based International Herald-Tribune carried a front-page banner headline the other day saying: “A hunt for culprits in Euro crisis.”

The seasoned foreign correspondent Jack Ewing wrote from Frankfurt:

“The debate about how to distribute the cost of preserving the euro zone often revolves around a fundamental question that is unspoken but implicit: Who caused the infernal crisis anyway?

“A hint: it wasn’t just the Greeks.” (IHT, August 25-26, 2012)

Wow, three years into the Euro-zone meltdown and the pundits have started to ask who’s to blame.

In Australia, we’re lucky. Business writers solved the problem years ago: the Greeks caused their own economic crisis because they “don’t pay tax” and they “don’t work”.

This shallow and crypto-racist analysis sank without trace when the debt contagion surfaced in Portugal, Spain, Ireland and Cyprus. Was no one paying tax in the Euro-zone, and were they all bludgers in Europe?

Jack Ewart conceded: “It is true that, before and after joining the euro in 2001, Greece obscured the true extent of its debt, sometimes with the help of financial transactions engineered by Goldman Sachs.

“Yet European banks, especially French and German banks, continued to lend Greece money. At the end of June 2009, just before the debt crisis exploded, Greece owed French banks 76.5 billion euros, or $96 billion, and German banks 38.6 billion euros, according to the Bank for International Settlements. The figures include both government and private sector debt. German and French banks also lent huge sums to Spain and Italy.”

Got the picture? When debt-addicted Greece was screaming for rehab, the response of the banks was to push more debt into its veins.

I thought that standard banking practice meant checking the creditworthiness of a client before lending money. But no due diligence was done on Greece – loans just kept flowing. By 2010 Greece’s public and private debt totalled an incredible 300 billion euros.

Now the banks want the Greek people (and the Spanish, Portuguese, Irish and Italians as well) to repay loans even though they knew nothing about them and didn’t approve them. In most cases they didn’t benefit from them either.

It is a recipe for a social explosion, or a series of them, across Western Europe.

FINGER LICKIN’ PROFITEERING

There are 10 large poultry farms in Greece churning out bird meat which forms one of the staples of the Greek diet. Chicken souvlaki, grilled chicken on a skewer, is a national dish.

Earlier this year the price of chicken shot up suddenly and inexplicably. It provoked formal complaints from people already hard-hit by wage and pension cuts and growing unemployment.

The Competition Commission, normally in a state of morbid inactivity, suddenly sprang to life, no doubt feeling the angry clamour from the shopping markets.

A background is as follows ….

The chicken meat market was deregulated by the PASOK (social democratic/Labor) government in 1996 in line with the worldwide infatuation with the “free market”.

The fixed price ceiling on chicken meat was abolished and theoretically there was open competition with the “market” setting the price.

It has now been established that post-deregulation the leading chicken farmers formed a cartel which secretly set the wholesale price and crushed any producer who tried to undercut it.

The cartel quickly became a monopoly controlling 80% of the market. The profits rolled in making millions of euros for chicken farmers, distributors and big retailers.

When the Competition Commission sleuths investigated the latest price hike they noticed something peculiar: the wholesale and retail prices rose by the same amount on the same day.

The commission isn’t rushing to penalise the cartel or order a cut in prices. In a statement it said it would consider the affair at its plenary session in October.

Readers in NSW may be interested to know that we have a deregulated chicken meat market as well. I’m not suggesting a cartel exists – perish the thought! Not that we’d ever find out from the smug seat-warmers of the ACCC.

STORY OF THE WEEK

“Four US soldiers plotted to assassinate Barack Obama and overthrow the government, a court has heard.

“One, private Michael Burnett, has pleaded guilty to manslaughter and gang charges in the killings last December of former soldier Michael Roark and his girlfriend, 17-year-old Tiffany York.

“Prosecutor Isabel Pauley said the group bought $87,000 (£55,000) of guns and bomb-making materials and plotted to take over Fort Stewart, bomb targets in Savannah and Washington state, as well as assassinate the president.” – AP

QUOTE OF THE WEEK

Judge Tom Head, a Republican, of Lubbock County, Texas, speaking on Rupert Murdoch’s Fox affiliate network about the possible re-election on President Barack Obama in November:

“He’s going to hand over the sovereignty of the United States to the UN. Then what happens? I’m thinking worst-case scenario — civil unrest, civil disobedience, civil war maybe.”